Will Overheated Competition in the Mobile Phone Market Disappear?

The mobile market, which has looked overheated since number portability has been implemented from January this year, is shaking due to a “sudden variant.”

This is because the first ranked company, SK Telecom, declared its intention to keep 52.3 percent of market occupation on May 25, which was also followed by the Information and Communication Policy Consulting Committee’s (ICPCC) decision to put off time limit regulations related to the merger of Shinsegi Telecom with SK Telecom for two years until January of 2007.

Mobile phone businesses, including three major phone companies, are getting fully prepared for whatever aftermath will be brought about by this measure.

--Will the overheated competition in the mobile phone market disappear?

Due to the declaration of SK Telecom’s intention to keep its share of market occupation and the decision of the ICPCC, the overheating is expected to calm down for the moment. SK Telecom was in a reconciliatory mood on its announcement that it would keep its market occupation rate under 52.3 percent until the end of next year to minimize the chances of a monopoly related dispute.

SK Telecom cannot promote a policy of excessive competition because of the ICPCC’s decision that calls for the extension of regulations on mergers and additional punishment for unfair actions from now on.

Relative latecomers to the mobile field, including companies such as KTF and LG Telecom, emphasize the need for stronger regulation to stop SK Telecom’s monopoly. They also downplayed SK’s “declaration of clean marketing” by saying, “It’s just for making a good impression.”

They seem to be relieved in a sense that they can avoid the first-ranked company’s capital-based marketing offensive.

KTF has been worried that SK Telecom will launch a marketing offensive based on capital after July, when regulations on number mobility are lifted. LG Telecom’s response is that it will then be able to stop subscriber secession and reduce marketing expenses.

-- Handset business in emergency

Actually, it is handset manufacturers placed in an emergent situation.

Though they expected special procurement followed by increased demand of number mobility in July, such possibility was greatly reduced because of the SK telecom’s declaration.

The related businesses predicts that the domestic market in the second half of the year will be largely shrieked, that is once expected to bring special procurement and benefit.

There are even concerns about movement on reducing marketing expenses of mobile companies.

It is because when they reduce expenses, the related market’s shrinkage is unavoidable as support for affiliated businesses such as membership service is also reduced.

The president of the SK telecom Kim Shin-bae announced, “We’re going to cut down more than 100b won in the second half of year by reducing marketing expenses.

It is unfavorable for the consumers for the moment as various membership benefits curtails while burdens for new subscription increases. However, a rate cut effect can be expected in the long term as mobile companies’ excessive marketing expenses pass on to the charge.

A research worker of the LG Economic Research Institute Moon kwon-mo emphasized that “there needs to come up a policy to use increased profits for a rate cut by making clean marketing atmosphere rooted.

Tae-Han Kim freewill@donga.com